BAGHDAD, Iraq — Khalil al-Suhail, a wealthy Baghdad restaurateur, has a theory: After a decade of war, sanctions and poverty, Iraqis have become virtually crisis-proof.

        For years, when showdowns with the United States loomed, Iraqis hoarded food and gasoline, and braced for doomsday. But the last time the Americans and the British bombed, during a December 1998 confrontation over U.N. weapons inspections, Iraqis took it in stride.

        “We just watched like it was a big fireworks display,” said Mr. al-Suhail. “We decided the crisis just wasn't going to dictate our lives anymore.”

        A decade after President Saddam Hussein led Iraq into the 1991 Persian Gulf War, its once-prosperous middle class has been decimated, its children die at an alarming rate, and international sanctions, while showing cracks, remain a heavy burden. But Saddam's rule, repressive as ever, faces no serious threats.

        What's changing in Iraq is the steady lifting of the siege mentality, and the U.N. oil-for-food program that has restored a measure of stability for Iraq's 23 million people.

        On Arasat Street, Baghdad's fanciest commercial strip, new Mercedes and BMWs, imported in defiance of sanctions, are parked in front of Mr. al-Suhail's restaurant, Castello's, a little castle complete with turrets, a small moat and a wooden drawbridge.

        To decorate his new eatery, Mr. al-Suhail scavenged piles of junk. Old wagon wheels gave a rustic touch. Car suspension systems, hung from the walls, made decorative torches.

        “What I did in my restaurant, all Iraqis have done in their own way,” he said. “We've all learned to improvise and adapt. Sometimes hardship brings out the best in you.”

        A combination of historic grievance and greed for oil revenue drove Saddam to invade Kuwait on Aug. 2, 1990. After months of brinksmanship, the Gulf War coalition launched a six-week bombing campaign on Jan. 17, 1991, followed by a four-day ground war that liberated the emirate.

        The Americans and their allies made the Gulf War look so easy: the videos of laser-guided bombs making pinpoint strikes, Western and Arab armies steamrolling into Kuwait, the scruffy Iraqi soldiers tossing rifles into the sand and surrendering by the battalion.

        But today, the clarity of war has yielded to the fog of peace.

        Saddam, full of his old strut and bombast, stood in his presidential box at a recent military parade, cigar dangling beneath his bushy mustache, casually loosing rifle shots into the air as he surveyed the cavalcade of tanks, missiles and warplanes that still make up one of the largest armies in the Middle East.

        United Nations inspectors, sucked into a maddening game of hide-and-seek in pursuit of Saddam's most dangerous weapons, left more than two years ago, their mission incomplete. The exact status of Iraq's weapons program is still an open question.

        The international sanctions campaign has evolved into a propaganda war between the United States and Iraq over who's to blame for the heavy toll paid by Iraq's citizens. As the Americans try to hold the line on sanctions, some Gulf War allies would rather trade with Iraq than punish it.

        “People aren't coming to Iraq for the love of Iraq. People are coming because there's business to be done,” said A.K. Hashimi, a senior member of Saddam's Baath Party.

        Iraq's economy bottomed out five years ago, forcing Saddam to grudgingly accept the oil-for-food program. Iraq bitterly denounces the terms, which give the United Nations full supervision over Iraq's spending. Also, nearly 30 percent of Iraq's oil revenue pays for war reparations and U.N. costs.

        Iraqis derisively call it an “oil-for-the-U.N. program.” Still, a ration-card system ensures every citizen gets the basics — flour, rice, beans, milk and cooking oil. And with sanctions loosened a bit, Iraq is pumping 3 million barrels of oil a day, close to its prewar output.

        Iraq has rebuilt much of the war damage, and few scars are visible in Baghdad.

        Modern apartment and office blocks have changed the skyline, their nondescript colors offset by elegant turquoise domes on mosques, and the Las Vegas-style palaces Saddam built during even the leanest days.

        Saddam is also building the Saddam Grand Mosque, the largest in the Middle East.

        Saddam statues at traffic circles multiply, along with the larger-than-life portraits on buildings: Saddam with flowers, Saddam holding the scales of justice, Saddam at prayer.

        His picture is on every front page of the state-controlled press, every day. Iraqi television manages to transform his banal comments at a Cabinet meeting into a week's worth of programming. Alternative viewing is hard to come by — owning a satellite dish is illegal.

        At 63, Saddam has been the most powerful man in Iraq for more than 30 years and his security services have eliminated all dissent and serious challenge to his rule.

        Iraq also feels it scored a victory by chasing out the U.N. weapons inspectors. It says it won't allow inspectors back until the sanctions are lifted. U.N. Secretary-General Kofi Annan is likely to wrangle with the Iraqis over the question in talks next month.

        Iraq claims it isn't reconstituting its nuclear, chemical and biological weapons programs. But Richard Butler, the Australian who headed the U.N. weapons inspection operation, is intensely skeptical.

        “There is strong reason to think that Iraq has used this two- year period to get back in business in all weapons fields,” Mr. Butler said in a telephone interview from New York. “The fundamental goal must be to get inspectors back into Iraq as soon as possible.”

        In making their case on sanctions, the Iraqis invariably steer visitors to places such as Saddam's General Hospital for Pediatrics.

        The leukemia ward has more than a dozen children receiving chemotherapy, a treatment more widely available but still scarce, said Dr. Mohammed Firas.

        Azhar Kamel, age 7, her strength depleted and her hair all gone, sleeps soundly as she receives her treatment from a drip bag. Her case is serious and the mortality rate is high, the doctor says.

        Ten children die at the hospital in a typical week, many from leukemia, and Dr. Firas believes half could be saved with more medicine and better equipment.

        The sanctions have never prevented Iraq from importing medicine. The Americans argue that Saddam spends the money on weapons and palaces.

        Iraq has received $21 billion through the oil-for-food program since 1996. It wants $1.7 billion of that sum earmarked for medical needs. Nothing prevents it from requesting more.

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